Federal Student Aid Updates – Changes in Ownership Reporting Requirements for Institutions

Krystyna Dias .

Recently, the Federal Student Aid (FSA) office released an Electronic Announcement detailing critical updates and reminders regarding the Change in Ownership (CIO) process for institutions participating in Title IV, HEA programs. This guidance underscores documentation and reporting requirements, the Temporary Provisional Program Participation Agreements (TPPPAs), and the conditions for month-to-month continuation of TPPPA. To clarify this guidance, this article offers a brief summary of the key changes and modifications to the most recent guidance:

Key CIO Reporting Requirements

Under 34 C.F.R. § 600.31, any CIO resulting in a change of control must adhere to specific reporting requirements to maintain Title IV program participation. The FSA outlines several critical elements:

90-Day Notification Requirement

Institutions must provide a 90-day notification before a CIO. Guidance on the necessary documents for this notification is detailed in Electronic Announcement GENERAL-24-54.

Materially Complete Application Submission

Institutions must submit a materially complete application within 10 business days following a CIO. Key documentation includes:

  1. State Authorization: Evidence of state licensure as of the day before the CIO.
  2. Accreditation Approval: Proof of accrediting agency’s approval effective the day before the CIO.
  3. Audited Financial Statements: For both the institution and the new owner, covering the two most recent fiscal years and prepared in accordance with GAAP and audited under GAGAS. Specific requirements for foreign entities, comparative statements, and higher-level ownership structures are outlined in the regulations.
  4. Acquisition Debt Documentation: Details and agreements related to any acquisition debt.

Documentation must confirm state authorization and accreditation as of the day prior to the transaction closing date. Acceptable forms include updated letters from state or accrediting agencies, or supplementary evidence such as confirmation emails or dated screenshots.

Financial Protection Requirements

Financial protection is mandated under various scenarios, including:

  1. New ownership entities without acceptable audited financial statements (25% of prior year’s Title IV funding required).
  2. New ownership entities with only one year of acceptable audited financial statements (10% required).
  3. Natural persons acquiring controlling interest (25% required if audited statements are unavailable).

The protection amount is prorated based on ownership share.

Temporary Provisional Program Participation Agreements (TPPPAs)

The Department may provisionally allow institutions undergoing a CIO to continue Title IV participation through a TPPPA, which expires on the last day of the month following the CIO. For month-to-month extensions, institutions must:

  1. Submit audited “same-day” balance sheets or statements of financial position.
  2. Provide state and accrediting agency approvals for the CIO.
  3. Submit a default management plan, if applicable.

Failure to comply with the above requirements will result in the loss of Title IV eligibility.

Submission Process

To accommodate new financial responsibility regulations effective July 1, 2024, the eZ-Audit system is being updated. Until then, institutions must email required financial statements and acquisition debt documentation to FSAFinancialAnalysisDivision@ed.gov, including specific information in the subject line for efficient processing.

These updates emphasize the importance of timely and accurate reporting in maintaining Title IV eligibility during a CIO. Institutions must closely follow these regulations to ensure compliance and avoid disruptions in their Title IV program participation. For help and assistance navigating these changes, please do not hesitate to reach out to our experts at info@heag.us for guidance and support.